Correlation Between LAKE MATERIALS and POSCO M
Can any of the company-specific risk be diversified away by investing in both LAKE MATERIALS and POSCO M at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining LAKE MATERIALS and POSCO M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAKE MATERIALS LTD and POSCO M TECH Co, you can compare the effects of market volatilities on LAKE MATERIALS and POSCO M and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in LAKE MATERIALS with a short position of POSCO M. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAKE MATERIALS and POSCO M.
Diversification Opportunities for LAKE MATERIALS and POSCO M
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LAKE and POSCO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding LAKE MATERIALS LTD and POSCO M TECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO M TECH and LAKE MATERIALS is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on LAKE MATERIALS LTD are associated (or correlated) with POSCO M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO M TECH has no effect on the direction of LAKE MATERIALS i.e., LAKE MATERIALS and POSCO M go up and down completely randomly.
Pair Corralation between LAKE MATERIALS and POSCO M
Assuming the 90 days trading horizon LAKE MATERIALS LTD is expected to under-perform the POSCO M. In addition to that, LAKE MATERIALS is 1.23 times more volatile than POSCO M TECH Co. It trades about -0.15 of its total potential returns per unit of risk. POSCO M TECH Co is currently generating about -0.17 per unit of volatility. If you would invest 1,630,000 in POSCO M TECH Co on August 29, 2024 and sell it today you would lose (170,000) from holding POSCO M TECH Co or give up 10.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LAKE MATERIALS LTD vs. POSCO M TECH Co
Performance |
| Timeline |
| LAKE MATERIALS LTD |
| POSCO M TECH |
LAKE MATERIALS and POSCO M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAKE MATERIALS and POSCO M
The main advantage of trading using opposite LAKE MATERIALS and POSCO M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAKE MATERIALS position performs unexpectedly, POSCO M can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in POSCO M will offset losses from the drop in POSCO M's long position.| LAKE MATERIALS vs. Samsung Electronics Co | LAKE MATERIALS vs. Samsung Electronics Co | LAKE MATERIALS vs. LG Energy Solution | LAKE MATERIALS vs. SK Hynix |
| POSCO M vs. LG Chemicals | POSCO M vs. Lotte Chemical Corp | POSCO M vs. Hyundai Steel | POSCO M vs. Seah Steel Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.
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